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39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 2

Miscellaneous

Transactions to avoid liability to tax.

[FA89 s86]

811. —(1) (a) In this section—

the Acts” means—

(i) the Tax Acts,

(ii) the Capital Gains Tax Acts,

(iii) the Value-Added Tax Act, 1972, and the enactments amending or extending that Act,

(iv) the Capital Acquisitions Tax Act, 1976, and the enactments amending or extending that Act,

(v) Part VI of the Finance Act, 1983, and the enactments amending or extending that Part, and

(vi) the statutes relating to stamp duty,

and any instruments made thereunder;

business” means any trade, profession or vocation;

notice of opinion” means a notice given by the Revenue Commissioners under subsection (6);

tax” means any tax, duty, levy or charge which in accordance with the Acts is placed under the care and management of the Revenue Commissioners and any interest, penalty or other amount payable pursuant to the Acts;

tax advantage” means—

(i) a reduction, avoidance or deferral of any charge or assessment to tax, including any potential or prospective charge or assessment, or

(ii) a refund of or a payment of an amount of tax, or an increase in an amount of tax, refundable or otherwise payable to a person,

including any potential or prospective amount so refundable or payable,

arising out of or by reason of a transaction, including a transaction where another transaction would not have been undertaken or arranged to achieve the results, or any part of the results, achieved or intended to be achieved by the transaction;

tax avoidance transaction” has the meaning assigned to it by subsection (2);

tax consequences”, in relation to a tax avoidance transaction, means such adjustments and acts as may be made and done by the Revenue Commissioners pursuant to subsection (5) in order to withdraw or deny the tax advantage resulting from the tax avoidance transaction;

transaction” means—

(i) any transaction, action, course of action, course of conduct, scheme, plan or proposal,

(ii) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable or intended to be enforceable by legal proceedings, and

(iii) any series of or combination of the circumstances referred to in paragraphs (i) and (ii),

whether entered into or arranged by one person or by 2 or more persons—

(I) whether acting in concert or not,

(II) whether or not entered into or arranged wholly or partly outside the State, or

(III) whether or not entered into or arranged as part of a larger transaction or in conjunction with any other transaction or transactions.

(b) In subsections (2) and (3), for the purposes of the hearing or rehearing under subsection (8) of an appeal made under subsection (7) or for the purposes of the determination of a question of law arising on the statement of a case for the opinion of the High Court, the references to the Revenue Commissioners shall, subject to any necessary modifications, be construed as references to the Appeal Commissioners or to a judge of the Circuit Court or, to the extent necessary, to a judge of the High Court, as appropriate.

(2) For the purposes of this section and subject to subsection (3), a transaction shall be a “tax avoidance transaction” if having regard to any one or more of the following—

(a) the results of the transaction,

(b) its use as a means of achieving those results, and

(c) any other means by which the results or any part of the results could have been achieved,

the Revenue Commissioners form the opinion that—

(i) the transaction gives rise to, or but for this section would give rise to, a tax advantage, and

(ii) the transaction was not undertaken or arranged primarily for purposes other than to give rise to a tax advantage,

and references in this section to the Revenue Commissioners forming an opinion that a transaction is a tax avoidance transaction shall be construed as references to the Revenue Commissioners forming an opinion with regard to the transaction in accordance with this subsection.

(3) (a) Without prejudice to the generality of subsection (2), in forming an opinion in accordance with that subsection and subsection (4) as to whether or not a transaction is a tax avoidance transaction, the Revenue Commissioners shall not regard the transaction as being a tax avoidance transaction if they are satisfied that—

(i) notwithstanding that the purpose or purposes of the transaction could have been achieved by some other transaction which would have given rise to a greater amount of tax being payable by the person, the transaction—

(I) was undertaken or arranged by a person with a view, directly or indirectly, to the realisation of profits in the course of the business activities of a business carried on by the person, and

(II) was not undertaken or arranged primarily to give rise to a tax advantage,

or

(ii) the transaction was undertaken or arranged for the purpose of obtaining the benefit of any relief, allowance or other abatement provided by any provision of the Acts and that the transaction would not result directly or indirectly in a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided.

(b) In forming an opinion referred to in paragraph (a) in relation to any transaction, the Revenue Commissioners shall have regard to—

(i) the form of that transaction,

(ii) the substance of that transaction,

(iii) the substance of any other transaction or transactions which that transaction may reasonably be regarded as being directly or indirectly related to or connected with, and

(iv) the final outcome and result of that transaction and any combination of those other transactions which are so related or connected.

(4) Subject to this section, the Revenue Commissioners as respects any transaction may at any time—

(a) form the opinion that the transaction is a tax avoidance transaction,

(b) calculate the tax advantage which they consider arises, or which but for this section would arise, from the transaction,

(c) determine the tax consequences which they consider would arise in respect of the transaction if their opinion were to become final and conclusive in accordance with subsection (5)(e), and

(d) calculate the amount of any relief from double taxation which they would propose to give to any person in accordance with subsection (5)(c).

(5) (a) Where the opinion of the Revenue Commissioners that a transaction is a tax avoidance transaction becomes final and conclusive, they may, notwithstanding any other provision of the Acts, make all such adjustments and do all such acts as are just and reasonable (in so far as those adjustments and acts have been specified or described in a notice of opinion given under subsection (6) and subject to the manner in which any appeal made under subsection (7) against any matter specified or described in the notice of opinion has been finally determined, including any adjustments and acts not so specified or described in the notice of opinion but which form part of a final determination of any such appeal) in order that the tax advantage resulting from a tax avoidance transaction shall be withdrawn from or denied to any person concerned.

(b) Subject to but without prejudice to the generality of paragraph (a), the Revenue Commissioners may—

(i) allow or disallow in whole or in part any deduction or other amount which is relevant in computing tax payable, or any part of such deduction or other amount,

(ii) allocate or deny to any person any deduction, loss, abatement, relief, allowance, exemption, income or other amount, or any part thereof, or

(iii) recharacterize for tax purposes the nature of any payment or other amount.

(c) Where the Revenue Commissioners make any adjustment or do any act for the purposes of paragraph (a), they shall afford relief from any double taxation which they consider would but for this paragraph arise by virtue of any adjustment made or act done by them pursuant to paragraphs (a) and (b).

(d) Notwithstanding any other provision of the Acts, where—

(i) pursuant to subsection (4)(c), the Revenue Commissioners determine the tax consequences which they consider would arise in respect of a transaction if their opinion that the transaction is a tax avoidance transaction were to become final and conclusive, and

(ii) pursuant to that determination, they specify or describe in a notice of opinion any adjustment or act which they consider would be, or be part of, those tax consequences,

then, in so far as any right of appeal lay under subsection (7) against any such adjustment or act so specified or described, no right or further right of appeal shall lie under the Acts against that adjustment or act when it is made or done in accordance with this subsection, or against any adjustment or act so made or done that is not so specified or described in the notice of opinion but which forms part of the final determination of any appeal made under subsection (7) against any matter specified or described in the notice of opinion.

(e) For the purposes of this subsection, an opinion of the Revenue Commissioners that a transaction is a tax avoidance transaction shall be final and conclusive—

(i) if within the time limited no appeal is made under subsection (7) against any matter or matters specified or described in a notice or notices of opinion given pursuant to that opinion, or

(ii) as and when all appeals made under subsection (7) against any such matter or matters have been finally determined and none of the appeals has been so determined by an order directing that the opinion of the Revenue Commissioners to the effect that the transaction is a tax avoidance transaction is void.

(6) (a) Where pursuant to subsections (2) and (4) the Revenue Commissioners form the opinion that a transaction is a tax avoidance transaction, they shall immediately on forming such an opinion give notice in writing of the opinion to any person from whom a tax advantage would be withdrawn or to whom a tax advantage would be denied or to whom relief from double taxation would be given if the opinion became final and conclusive, and the notice shall specify or describe—

(i) the transaction which in the opinion of the Revenue Commissioners is a tax avoidance transaction,

(ii) the tax advantage or part of the tax advantage, calculated by the Revenue Commissioners which would be withdrawn from or denied to the person to whom the notice is given,

(iii) the tax consequences of the transaction determined by the Revenue Commissioners in so far as they would refer to the person, and

(iv) the amount of any relief from double taxation calculated by the Revenue Commissioners which they would propose to give to the person in accordance with subsection (5)(c).

(b) Section 869 shall, with any necessary modifications, apply for the purposes of a notice given under this subsection or subsection (10) as if it were a notice given under the Income Tax Acts.

(7) Any person aggrieved by an opinion formed or, in so far as it refers to the person, a calculation or determination made by the Revenue Commissioners pursuant to subsection (4) may, by notice in writing given to the Revenue Commissioners within 30 days of the date of the notice of opinion, appeal to the Appeal Commissioners on the grounds and, notwithstanding any other provision of the Acts, only on the grounds that, having regard to all of the circumstances, including any fact or matter which was not known to the Revenue Commissioners when they formed their opinion or made their calculation or determination, and to this section—

(a) the transaction specified or described in the notice of opinion is not a tax avoidance transaction,

(b) the amount of the tax advantage or the part of the tax advantage, specified or described in the notice of opinion which would be withdrawn from or denied to the person is incorrect,

(c) the tax consequences specified or described in the notice of opinion, or such part of those consequences as shall be specified or described by the appellant in the notice of appeal, would not be just and reasonable in order to withdraw or to deny the tax advantage or part of the tax advantage specified or described in the notice of opinion, or

(d) the amount of relief from double taxation which the Revenue Commissioners propose to give to the person is insufficient or incorrect.

(8) The Appeal Commissioners shall hear and determine an appeal made to them under subsection (7) as if it were an appeal against an assessment to income tax and, subject to subsection (9), the provisions of the Income Tax Acts relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications; but on the hearing or rehearing of the appeal—

(a) it shall not be lawful to enquire into any grounds of appeal other than those specified in subsection (7), and

(b) at the request of the appellants, 2 or more appeals made by 2 or more persons pursuant to the same opinion, calculation or determination formed or made by the Revenue Commissioners pursuant to subsection (4) may be heard or reheard together.

(9) (a) On the hearing of an appeal made under subsection (7), the Appeal Commissioners shall have regard to all matters to which the Revenue Commissioners may or are required to have regard under this section, and—

(i) in relation to an appeal made on the grounds referred to in subsection (7)(a), the Appeal Commissioners shall determine the appeal, in so far as it is made on those grounds, by ordering, if they or a majority of them—

(I) consider that the transaction specified or described in the notice of opinion or any part of that transaction is a tax avoidance transaction, that the opinion or the opinion in so far as it relates to that part is to stand,

(II) consider that, subject to such amendment or addition thereto as the Appeal Commissioners or the majority of them deem necessary and as they shall specify or describe, the transaction, or any part of it, specified or described in the notice of opinion, is a tax avoidance transaction, that the transaction or that part of it be so amended or added to and that, subject to the amendment or addition, the opinion or the opinion in so far as it relates to that part is to stand, or

(III) do not so consider as referred to in clause (I) or (II), that the opinion is void,

(ii) in relation to an appeal made on the grounds referred to in subsection (7)(b), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the amount of the tax advantage or the part of the tax advantage specified or described in the notice of opinion be increased or reduced by such amount as they shall direct or that it shall stand,

(iii) in relation to an appeal made on the grounds referred to in subsection (7)(c), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the tax consequences specified or described in the notice of opinion shall be altered or added to in such manner as they shall direct or that they shall stand, or

(iv) in relation to an appeal made on the grounds referred to in subsection (7)(d), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the amount of the relief from double taxation specified or described in the notice of opinion shall be increased or reduced by such amount as they shall direct or that it shall stand.

(b) This subsection shall, subject to any necessary modifications, apply to the rehearing of an appeal by a judge of the Circuit Court and, to the extent necessary, to the determination by the High Court of any question or questions of law arising on the statement of a case for the opinion of the High Court.

(10) The Revenue Commissioners may at any time amend, add to or withdraw any matter specified or described in a notice of opinion by giving notice (in this subsection referred to as “the notice of amendment”) in writing of the amendment, addition or withdrawal to each and every person affected thereby, in so far as the person is so affected, and subsections (1) to (9) shall apply in all respects as if the notice of amendment were a notice of opinion and any matter specified or described in the notice of amendment were specified or described in a notice of opinion; but no such amendment, addition or withdrawal may be made so as to set aside or alter any matter which has become final and conclusive on the determination of an appeal made with regard to that matter under subsection (7).

(11) Where pursuant to subsections (2) and (4) the Revenue Commissioners form the opinion that a transaction is a tax avoidance transaction and pursuant to that opinion notices are to be given under subsection (6) to 2 or more persons, any obligation on the Revenue Commissioners to maintain secrecy or any other restriction on the disclosure of information by the Revenue Commissioners shall not apply with respect to the giving of those notices or to the performance of any acts or the discharge of any functions authorised by this section to be performed or discharged by them or to the performance of any act or the discharge of any functions, including any act or function in relation to an appeal made under subsection (7), which is directly or indirectly related to the acts or functions so authorised.

(12) The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions, including the forming of an opinion, authorised by this section to be performed or discharged by the Revenue Commissioners, and references in this section to the Revenue Commissioners shall with any necessary modifications be construed as including references to an officer so nominated.

(13) This section shall apply as respects any transaction where the whole or any part of the transaction is undertaken or arranged on or after the 25th day of January, 1989, and as respects any transaction undertaken or arranged wholly before that date in so far as it gives rise to, or would but for this section give rise to—

(a) a reduction, avoidance or deferral of any charge or assessment to tax, or part thereof, where the charge or assessment arises by virtue of any other transaction carried out wholly on or after a date, or

(b) a refund or a payment of an amount, or of an increase in an amount, of tax, or part thereof, refundable or otherwise payable to a person where that amount or increase in the amount would otherwise become first so refundable or otherwise payable to the person on a date,

which could not fall earlier than the 25th day of January, 1989.

Taxation of income deemed to arise from transfers of right to receive interest from securities.

[ITA67 s449; CTA76 s140(1) and Sch2 PtI par22]

812. —(1) In this section—

interest” includes dividends, annuities and shares of annuities;

securities” include stocks and shares of all descriptions.

(2) Where in any year of assessment or accounting period an owner (in this section referred to as “the owner”) of any securities sells or transfers the right to receive any particular interest payable (whether before or after such sale or transfer) in respect of those securities without selling or transferring those securities, then, and in every such case, the following provisions shall apply:

(a) for the purposes of the Tax Acts that interest (whether it would or would not be chargeable to tax if this section had not been enacted)—

(i) shall be deemed to be the income of the owner or, where the owner is not the beneficial owner of the securities and some other person (in this section referred to as “the beneficiary”) is beneficially entitled to the income arising from the securities, the income of the beneficiary,

(ii) shall be deemed to be income of the owner or the beneficiary, as the case may be, for that year of assessment or accounting period, as the case may be,

(iii) shall not be deemed to be income of any other person, and

(iv) shall, where the proceeds of the sale or transfer are chargeable to tax under Schedule C or under Chapter 2 of Part 4 , be deemed to be equal in amount to the amount of those proceeds;

(b) where the right to receive that particular interest is subsequently sold, transferred or otherwise realised, the proceeds of such subsequent sale, transfer or other realisation shall not be deemed for any of the purposes of the Tax Acts to be income of the person by or on whose behalf such subsequent sale, transfer or other realisation is made or effected;

(c) where the securities are of such character that the interest payable in respect of the securities may be paid without deduction of tax, then, unless the owner or beneficiary, as the case may be, shows that the proceeds of any sale or other realisation of the right to receive the interest, which is deemed to be income of the owner or of the beneficiary, as the case may be, by virtue of this section, have been charged to tax under Schedule C or under Chapter 2 of Part 4 , the owner or beneficiary, as the case may be, shall be chargeable to tax under Case IV of Schedule D in respect of that interest, but shall be entitled to credit for any tax which that interest is shown to have borne;

(d) where in any case to which paragraph (c) applies the computation of the tax in respect of the interest which is made chargeable under Case IV of Schedule D by that paragraph would, if that interest had been chargeable under Case III of Schedule D, have been made by reference to the amount received in the State, the tax chargeable pursuant to paragraph (c) shall be computed on the full amount of the sums received in the State in the year of assessment or in any subsequent year of assessment in which the owner remains the owner of the securities;

(e) nothing in this subsection shall affect any provision of the Tax Acts authorising or requiring the deduction of tax from any interest which is deemed by virtue of this subsection to be income of the owner or of the beneficiary or from the proceeds of any subsequent sale, transfer or other realisation mentioned in this subsection of the right to receive that particular interest.

(3) In relation to corporation tax—

(a) subsection (2)(c) shall apply (subject to the provisions of the Corporation Tax Acts relating to distributions) to any interest, whether or not the securities are of such character that the interest may be paid without deduction of tax, and as if “, but shall be entitled to credit for any tax which that interest is shown to have borne” were deleted, and

(b) subsection (2)(d) shall not apply.

(4) The Revenue Commissioners may by notice in writing require any person to furnish them, within such time (not being less than 28 days from the service of the notice) as shall be specified in the notice, with such particulars in relation to all securities of which such person was the owner at any time during the period specified in the notice as the Revenue Commissioners may consider to be necessary for the purposes of this section or for the purpose of discovering whether—

(a) tax has been borne in respect of the interest payable in respect of those securities, or

(b) the proceeds of any sale, transfer or other realisation of the right to receive the interest in respect of those securities has been charged to tax under Schedule C or under Chapter 2 of Part 4 .

Taxation of transactions associated with loans or credit.

[FA74 s41(1) to (6); CTA76 s140(1) and Sch2 PtI par45 and s164 and Sch3 PtII]

813. —(1) This section shall apply as respects any transaction effected with reference to the lending of money or the giving of credit, or the varying of the terms on which money is loaned or credit is given, or which is effected with a view to enabling or facilitating any such arrangement concerning the lending of money or the giving of credit.

(2) Subsection (1) shall apply whether the transaction is effected between the lender or creditor and the borrower or debtor, or between either of them and a person connected with the other or between a person connected with one and a person connected with the other.

(3) Where the transaction provides for the payment of any annuity or other annual payment, not being interest but being a payment chargeable to tax under Schedule D, the payment shall be treated for the purposes of the Tax Acts as if it were a payment of annual interest.

(4) Where the transaction is one by which an owner of any securities or other property carrying a right to income (in this subsection referred to as “the owner”) agrees to sell or transfer the property, and by the same or any collateral agreement—

(a) the purchaser or transferee (in this subsection referred to as “the buyer”) or a person connected with the buyer agrees to sell or transfer at a later date the same or any other property to the owner or a person connected with the owner, or

(b) the owner or a person connected with the owner acquires an option, which the owner or the person connected with the owner subsequently exercises, to buy or acquire the same or any other property from the buyer or a person connected with the buyer,

then, without prejudice to the liability of any other person, the owner shall be chargeable to tax under Case IV of Schedule D on an amount equal to any income which arises from the first-mentioned property at any time before the repayment of the loan or the termination of the credit.

(5) Where under the transaction a person assigns, surrenders or otherwise agrees to waive or forego income arising from any property (without a sale or transfer of the property), then, without prejudice to the liability of any other person, the first-mentioned person shall be chargeable to tax under Case IV of Schedule D on a sum equal to the amount of income assigned, surrendered, waived or foregone.

(6) Where credit is given for the purchase price of any property and the rights attaching to the property are such that during the subsistence of the debt the purchaser's rights to income from the property are suspended or restricted, the purchaser shall be treated for the purposes of subsection (5) as having surrendered a right to income of an amount equivalent to the income which the purchaser has in effect foregone by obtaining the credit.

(7) The amount of any income payable subject to deduction of tax at the standard rate shall be taken for the purposes of subsection (5) as the amount before deduction of that tax.

Taxation of income deemed to arise from transactions in certificates of deposit and assignable deposits.

[FA74 s55; CTA76 s140(1) and Sch2 PtI par47; FA77 s42 and Sch1 PtIV par5]

814. —(1) In this section—

assignable deposit” means a deposit of money in any currency, which has been deposited with any person, whether it is to be repaid with or without interest and which at the direction of the depositor may be assigned with or without interest to another person;

certificate of deposit” means a document relating to money in any currency, which has been deposited with the issuer or some other person, being a document which recognises an obligation to pay a stated amount to bearer or to order, with or without interest, and being a document by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable.

(2) This section shall apply to any right—

(a) to receive from any person an amount of money, with or without interest, which is stated in a certificate of deposit issued to the person who has deposited the money or to any other person, or

(b) to receive from any person an amount of money, with or without interest, being a right arising from an assignable deposit which may be assigned or transferred to another person by the person who has deposited the money or by any person who has acquired the right to do so.

(3) Where after the 3rd day of April, 1974, a person acquires a right to which this section applies, any gain arising to the person from the disposal of that right or, except in so far as it is a right to receive interest, from its exercise shall, if not to be taken into account as a trading receipt, be deemed for the purposes of the Tax Acts to be annual profits or gains chargeable to tax under Case IV of Schedule D and shall be charged to tax accordingly.

(4) Where on or before the 3rd day of April, 1974, a person acquired a right to which this section applies and disposes or disposed of, or exercises or exercised, the right after that date, so much of any gain arising to the person from that disposal, or, except in so far as it is a right to receive interest, from that exercise, as bears to the total amount of the gain the same proportion as the number of days from the 3rd day of April, 1974, to the date of the disposal or exercise bears to the total number of days from the date of the acquisition to the date of the disposal or exercise, shall, if not to be taken into account as a trading receipt, be deemed for the purposes of the Tax Acts to be annual profits or gains chargeable to tax under Case IV of Schedule D and shall be charged to tax accordingly.

(5) Where a person sustains a loss in a transaction which if profits had arisen from it would be chargeable to tax by virtue of subsection (3) or (4), then, if the person is chargeable to tax under Schedule C or D in respect of the interest payable on the amount of money the right to which has been disposed of, the amount of that interest shall be included in the amounts against which the person may claim to set off the amount of the loss under section 383 or 399 , as the case may be.

(6) For the purposes of this section, profits or gains shall not be treated as falling to be taken into account as a trading receipt by reason only that they are included in the computation required by section 707 .

Taxation of income deemed to arise on certain sales of securities.

[FA84 s29(1) to (3)(a) and (4) to (5); FA91 s27; FA93 s21; FA94 s26]

815. —(1) In this section—

owner”, in relation to securities, means at any time the person who would be entitled, if the securities were redeemed at that time by the person who issued them, to the proceeds of the redemption;

securities” includes—

(a) assets which are not chargeable assets for the purposes of capital gains tax by virtue of section 607 , and

(b) stocks, bonds and obligations of any government, municipal corporation, company or other body corporate, whether creating or evidencing a charge on assets or not,

but does not include shares (within the meaning of the Companies Act, 1963 ) of a company (within the meaning of that Act) or similar body.

(2) (a) Subject to paragraphs (b) to (d) and subsection (3), where the owner of a security (in this subsection referred to as “the owner”) sells or transfers, or causes or authorises to be sold or transferred, the security and where any interest payable in respect of the security is receivable otherwise than by the owner, then, for the purposes of this section—

(i) interest payable in respect of the security shall be deemed for the purposes of the Tax Acts to have accrued on a day to day basis from the date on which the owner acquired the security, and

(ii) the owner shall be chargeable under Case IV of Schedule D on interest so deemed to have accrued from that date up to the date of the contract for sale or transfer of the security or the date of payment of the consideration in respect of the sale or transfer, whichever is the later.

(b) Where during the owner's period of ownership of the security the owner has received interest in respect of the security in respect of which the owner is chargeable to tax under any other provision of the Tax Acts, the amount of interest on which the owner is chargeable under this section shall be reduced by the amount in respect of which the owner is so chargeable under that other provision.

(c) Where under the terms of the sale or transfer of the security or an associated agreement, arrangement, understanding, promise or undertaking, whether express or implied, the owner—

(i) agrees to buy back or reacquire the security, or

(ii) acquires an option which the owner subsequently exercises to buy back or reacquire the security,

the charge to tax imposed under this section shall be based on the interest deemed to have accrued up to the next date after that sale or transfer on which interest is payable in respect of the security.

(d) Where the owner subsequently resells or retransfers, or causes or authorises to be resold or retransferred, the security, any further charge to tax under this section in respect of that subsequent resale or retransfer shall be based on interest deemed to have accrued from a date not earlier than that next payment date.

(3) This section shall not apply—

(a) where the security has been held by the same owner for a continuous period of at least 2 years immediately before the date of such contract for sale or transfer or the date of such payment of consideration, whichever is the later, as is referred to in subsection (2)(a), the personal representatives of a deceased person whose estate is in the course of administration and the deceased person being regarded for the purposes of this paragraph as being the same owner,

(b) where the owner is a person carrying on a trade which consists wholly or partly of dealing in securities, the profits of which are chargeable to income tax or corporation tax under Case I of Schedule D for the year of assessment or, as the case may be, the accounting period in respect of which the consideration for the sale is taken into account in computing for the purposes of assessment to income tax or corporation tax for that year or accounting period the profits of the trade,

(c) where—

(i) the owner is an undertaking for collective investment (within the meaning of section 738 ), and

(ii) any gain or loss accruing to the owner on the sale or transfer is a chargeable gain or an allowable loss, as the case may be,

(d) where the sale or transfer is a sale or transfer by a wife to her husband at a time when she is treated as living with him for income tax purposes as provided in section 1015 , or a sale or transfer by a husband to a wife at such time, the husband and the wife being regarded for the purposes of paragraph (a), in the case of such a transaction or in the case of a sale or transfer by the husband or the wife to any other person after such a transaction or transactions, as being the same owner, or

(e) where the security is a security the interest on which is treated as a distribution for the purposes of the Corporation Tax Acts.

(4) The reference in subsection (2)(c) to buying back or reacquiring the security shall be deemed to include references to buying or acquiring a similar security, and securities shall be so deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.

(5) (a) For the purposes of identifying securities acquired by an owner with securities included in a sale or transfer by the owner, in so far as the securities are of the same class, securities acquired at a later date shall be deemed to be so included before securities acquired at an earlier date.

(b) Securities shall be regarded as being of the same class where they entitle their owners to the same rights against the same person as to capital and interest and the same remedies for the enforcement of those rights.

(6) (a) Without prejudice to any other provision of the Tax Acts requiring the disclosure of information, an inspector may by notice in writing require any person to whom paragraph (b) applies to furnish within the time specified in the notice such particulars as the inspector considers necessary for the purposes of this section and for the purpose of determining whether a charge to tax arises under this section.

(b) This paragraph shall apply to—

(i) a person who issues a security,

(ii) any agent of such a person, and

(iii) an owner of a security.

Taxation of shares issued in place of cash dividends.

[FA74 s56(1), (2), (3)(b) and (c) and (4); FA93 s36]

816. —(1) In this section—

company” means any body corporate;

quoted company” means a company whose shares or any class of whose shares—

(a) are listed in the official list of the Irish Stock Exchange or any other stock exchange, or

(b) are dealt in on the smaller companies market, the unlisted securities market or the exploration securities market of the Irish Stock Exchange or on any similar or corresponding market of any other stock exchange;

share” means share in the share capital of a company and, other than in the definition of “quoted company”, includes stock and any other interest in the company.

(2) Where any person as a consequence of the exercise (whether before, on or after the declaration of a distribution of profits by a company which is not a quoted company) of an option to receive in respect of shares in the company either a sum in cash or additional share capital of the company receives such additional share capital, that person shall be deemed for the purposes of the Tax Acts to have received from the company, instead of such share capital, income equal to the sum that person would have received if that person had received the distribution in cash.

(3) Any income deemed under subsection (2) to have been received from a company by a person shall—

(a) if the company is resident outside the State, be treated as income from securities and possessions outside the State and be assessed and charged to tax under Case III of Schedule D;

(b) if the company is resident in the State, be treated as profits or gains not within any other Case of Schedule D and not charged by virtue of any other Schedule and be assessed and charged to tax under Case IV of Schedule D.

(4) For the purposes of this section, an option to receive either a dividend in cash or additional share capital shall be conferred on a person not only where that person is required to choose one or the other, but also where that person is offered the one subject to a right, however expressed, to choose the other instead, and a person's abandonment of, or failure to exercise, such a right shall be treated for those purposes as an exercise of the option.

Schemes to avoid liability to tax under Schedule F.

[FA89 s88(1) to (7)]

817. —(1) (a) In this section—

appeal” means an appeal made in accordance with section 933 ;

close company” has the same meaning as it has, by virtue of sections 430 and 431 , for the purposes of the Corporation Tax Acts;

market value” shall be construed in accordance with section 548 ;

new consideration” has the same meaning as in section 135 ;

shares” includes loan stock, debentures and any interest or rights in or over, or any option in relation to, shares, loan stock or debentures, and references to “shareholder” shall be construed accordingly.

(b)(i) For the purposes of this section, there shall be a disposal of shares by a shareholder where the shareholder disposes of shares or is treated under the Capital Gains Tax Acts as disposing of shares, and references to a disposal of shares shall include references to a part disposal of shares within the meaning of those Acts.

(ii) Where under any arrangement between a close company (in this subparagraph referred to as “the first-mentioned company”) and its, or some of its, shareholders (being any arrangement similar to an arrangement entered into for the purposes of or in connection with a scheme of reconstruction or amalgamation) another close company issues shares to those shareholders in respect of or in proportion to (or as nearly as may be in proportion to) their holdings of shares in the first-mentioned company, but the shares in the first-mentioned company are either retained by the shareholders or are cancelled, then, those shareholders shall for the purposes of this section be treated as making a disposal or a part disposal, as the case may be, of the shares in the first-mentioned company in exchange for those shares held by them in consequence of such arrangement.

(c) For the purposes of this section, the interest of a shareholder in a trade or business shall not be significantly reduced following a disposal of shares, or the carrying out of a scheme or arrangement of which the disposal of shares is a part, only if at any time after the disposal the percentage of—

(i) the ordinary share capital of the close company carrying on the trade or business at such time which is beneficially owned by the shareholder at such time,

(ii) any profits, which are available for distribution to equity holders, of the close company carrying on the trade or business at such time to which the shareholder is beneficially entitled at such time, or

(iii) any assets, available for distribution to equity holders on a winding up, of the close company carrying on the trade or business at such time to which the shareholder would be beneficially entitled at such time on a winding up of the close company, is not significantly less than the percentage of that ordinary share capital or those profits or assets, as the case may be, of the close company carrying on the trade or business at any time before the disposal—

(I) which the shareholder beneficially owned, or

(II) to which the shareholder was beneficially entitled,

at such time before the disposal, and sections 413 to 415 and section 418 shall apply, but without regard to section 411 (1)(c) in so far as it relates to those sections, with any necessary modifications, to the determination for the purposes of this paragraph of the percentage of share capital or other amount which a shareholder beneficially owns or is beneficially entitled to, as they apply to the determination for the purposes of Chapter 5 of Part 12 of the percentage of any such amount which a company so owns or is so entitled to.

(d) The value of any amount received in money's worth shall for the purposes of this section be the market value of the money's worth at the time of its receipt.

(2) This section shall apply for the purposes of counteracting any scheme or arrangement undertaken or arranged by a close company, or to which the close company is a party, being a scheme or arrangement the purpose of which, or one of the purposes of which, is to secure that any shareholder in the close company avoids or reduces a charge or assessment to income tax under Schedule F by converting into a capital receipt of the shareholder any amount which would otherwise be available for distribution by the close company to the shareholder by means of a dividend.

(3) Subject to subsection (7), this section shall apply to a disposal of shares in a close company by a shareholder if, following the disposal or the carrying out of a scheme or arrangement of which the disposal is a part, the interest of the shareholder in any trade or business (in this section referred to as “the specified business”) which was carried on by the close company at the time of the disposal, whether or not the specified business continues to be carried on by the close company after the disposal, is not significantly reduced.

(4) Subject to subsection (5) and notwithstanding section 130 (1) or any provision of the Capital Gains Tax Acts, the amount of—

(a) the proceeds in either or both money and money's worth received by a shareholder in respect of a disposal of shares in a close company to which this section applies, or

(b) if it is less than those proceeds, the excess of those proceeds over any consideration, being consideration which—

(i) is new consideration received by the close company for the issue of those shares, and

(ii) has not previously been taken into account for the purposes of this subsection, shall be treated for the purposes of the Tax Acts as a distribution (within the meaning of the Corporation Tax Acts) made at the time of the disposal by the close company to the shareholder.

(5) (a) In this subsection, “capital receipt” means, as appropriate in the circumstances, any amount of either or both money and money's worth (other than shares issued by a close company carrying on the specified business) which—

(i) is received by a shareholder in respect of a disposal of shares or by reason of any act done pursuant to a scheme or arrangement of which the disposal is a part, and

(ii) apart from this section is not chargeable to income tax in the hands of the shareholder.

(b) The amount which at any time may be treated under subsection (4) as a distribution made by a close company to a shareholder in respect of any disposal of shares in the close company shall not exceed the amount of the capital receipt, or the aggregate of the amounts of the capital receipts, which at such time has or have been received by the shareholder—

(i) in respect of the disposal, or

(ii) by reason of any act done pursuant to a scheme or arrangement of which the disposal is a part.

(c) A capital receipt received by a shareholder at any time on or after the disposal shall in respect of such time result in so much of the amount mentioned in subsection (4) being treated as a distribution (which is made by the close company to the shareholder at the time of the disposal) as does not exceed the amount of the capital receipt, or the aggregate of the amounts of such capital receipts, which at such time on or after the disposal has or have been received by the shareholder.

(d) Where as a result of a shareholder having received a capital receipt a close company is treated as having made a distribution to the shareholder under subsection (4), any provision of the Income Tax Acts in respect of interest on unpaid tax shall apply for the purposes of tax due in respect of that distribution as if the tax were due and payable only from the day on which the shareholder received the capital receipt.

(6) Notwithstanding section 136 (1), where a shareholder in a close company is treated under this section as having received a distribution from the close company, the shareholder shall only be entitled to a tax credit in respect of the distribution to the extent that the close company has paid advance corporation tax in respect of the distribution in accordance with Chapter 8 of Part 6 ; but, where a close company would but for the application of section 162 have paid an amount or an additional amount of advance corporation tax in respect of a distribution, the close company shall be treated as having paid such an amount or additional amount of advance corporation tax in respect of the distribution for the purposes of this subsection.

(7) This section shall not apply as respects a disposal of shares in a close company by a shareholder where it is shown to the satisfaction of the inspector or, on the hearing or the rehearing of an appeal, to the satisfaction of the Appeal Commissioners or a judge of the Circuit Court, as the case may be, that the disposal was made for bona fide commercial reasons and not as part of a scheme or arrangement the purpose or one of the purposes of which was the avoidance of tax.